BT weighed down by problems at Global Services business

By Paul Sandle

LONDON (Reuters) - BT Group's quarterly earnings were dragged down by continuing problems at its Global Services unit and higher costs for pensions and sports rights, sending shares in the troubled telecoms company to four-year lows.

Chief Executive Gavin Patterson said BT's consumer operations -- home broadband and mobile network EE -- performed well over the three months but that was not enough to offset pressures in its operations serving business and governments.

Shares in the company, down 30 percent in the last 12 months, fell 2.6 percent to 253.7 pence by 1030 GMT as analysts noted that the company had signalled that investment in the business would be prioritised over the dividend payout.

It maintained the interim dividend at 4.85 pence per share.

Patterson, in the job since 2013, said BT was taking "robust action" to turn around Global Services, which has seen a slowdown in demand from multinationals and was hit by an accounting scandal in Italy in its last financial year.

A restructuring of the unit, announced in May, was progressing well, he said, and 1,600 people had already left the business and another 1,500 roles would go in the second half.

NEW CHAIRMAN, FAMILIAR ISSUES

Global Services is not the only problem that Patterson, and new chairman Jan du Plessis, have to tackle.

BT needs to address a pension deficit that stood at 7.7 billion pounds as of the end of September, and also generate cash to keep buying sports rights, invest in network upgrades and fulfil a pledge to maintain a progressive dividend policy.

"While there are near-term challenges, our largest business units are performing to plan and generating cash for reinvestment and shareholder returns," Patterson told reporters on Thursday.

Patterson said the group was maintaining its outlook for the financial year and its progressive dividend policy.

The company is in talks with its pension trustees about its funding obligations, and separately is talking to its pension scheme members and unions about changing scheme terms.

SPORTS BATTLE

Its TV service, which is anchored on European Champions League and English Premier League soccer coverage, had a weak quarter, with net additions of 7,000, compared with 63,000 a year ago.

BT has spent heavily on sports rights to shore up its wider business against competition from Sky.

It agreed in March to pay 1.2 billion pounds to retain Champions League rights from 2018-2021, while its current three-year Premier League deal costs 960 million.

Patterson said the customer figures partially reflected a quieter broadband market, and the decision to charge all its customers for the service. It had previously been offered as part of a broadband subscription.

BT said it added 279,000 contract mobile customers in the quarter, in line with the same quarter a year earlier, and 179,000 fast fibre broadband connections.

The total number of fibre connections on its Openreach network, which supplies connections for other providers as well as BT, rose 505,000 to reach a total of 8.6 million.

The company, Britain's biggest telecoms firm, reported adjusted core earnings of 1.81 billion pounds for the three months to end-September, slightly ahead of forecasts, on revenue down 2 percent to 5.95 billion pounds.

(Editing by Kate Holton and Keith Weir)